I. & M. Smith (Pty) Ltd. since 1915
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I. & M. Smith (Pty) Ltd.

Coffee Market Report

15 Sep 2017
The respected analysts Safras & Mercado have forecast that the new Brazil July 2017 to June 2018 coffee crop which harvest is complete, which is put at 51.1 million bags, is estimated so far at 44% of this harvest is already sold. This figure is slightly behind that of the same time in the previous year, which was reported to be at 46% around same time. The Brazil Real has meanwhile firmed steadily over the past two months against the U.S. Dollar and from levels of around 3.30 in July to be trading at around 3.12 today. This is likely contributing toward a reticence of Brazil producers to participate as sellers into the prevailing market, while at the same time contributing by lack of any sizable volume participation to maintain the buoyancy of the reference prices in New York.

There has been a degree of selling activity against the recovery registered in New York meanwhile, although there is no particular pressure on the part of Brazil producers to be active sellers of their new crop coffees. This, with the knowledge that the soon to come spring and follow through summer rain season looms ahead and these rains are needed to establish flowering and set the next July 2018 to June 2019 Brazil crop, while the arrival of the rains are traditionally a topic of focus for the speculative sector of the coffee markets. In this regard, the latest weather reports indicate a continuation of dry and hot weather over much of the Brazil arabica coffee belt over the next seven days and preliminary forecasts for light rain to come toward the end of the month.

There has been news overnight meanwhile, that Typhoon Doksuri has made landfall in Vietnam central provinces of Ha Tinh and Quang Binh and thus far infrastructural damage has been reported. There are no indications meanwhile, that there has been any crop damage in the interior of these provinces where there is some regional arabica coffee production.

The November to December contracts arbitrage between the London and New York markets broadened yesterday, to register this at 47.24 usc/Lb., while this equates to 34.32% price discount for the London Robusta coffee market.

The Certified washed Arabica coffee stocks held against the New York exchange were seen to increase by 5,566 bags yesterday; to register these stocks at 1,783,147 bags. There was meanwhile an decrease at 495 bags in the number of bags pending grading for this exchange; to register these pending grading stocks at 62,770 bags.

It was a mixed day on the commodity markets yesterday, a firmer day for the oil markets while Sterling posted renewed strength as the Bank of England signalled the potential for an interest rate increase in the coming months. It was a firmer day for Oil, Sugar, Soybean, Corn and Wheat. In the precious metals sector Gold registered a recovery, Silver and Palladium in positive territory. It was however a softer day for Coffee, Cocoa, Cotton, Copper, Orange Juice and Palladium. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.1385% lower, to see this Index registered at 410.83. The day starts with the U.S. Dollar steady and trading at 1.33 to Sterling and at 1.19 to the Euro, while North Sea Oil is buoyant and is selling at US$ 56.25 per barrel.

The London market started the day on a mildly positive note and with a similar opening in New York, just above par. In a relatively thin morning session, London took a narrowly negative track, as did New York move into negative territory, although narrowly and the midsession saw New York back into positive territory, with London maintain a softer stance. The afternoon session moved toward the close in much the same fashion, both markets not far from unchanged; mildly positive in New York and mildly negative in London. As the day drew to a close however, New York lost all gains accrued over the afternoon and with London, finished the day on a modestly softer note, after a good volume day, to set the close yesterday, as follows:


LONDON ROBUSTA US$/MT NEW YORK ARABICA USc/Lb.

SEP   2014 – 10                            SEP 135.85 – 0.75
NOV 1993 – 10                             DEC 137.65 – 0.20
JAN   1981 – 8                              MAR 141.10 – 0.20
MAR 1977 – 9                              MAY 143.40 – 0.20
MAY 1988 – 9                              JUL   145.65 – 0.20
JUL   2015 – 9                              SEP   147.95 – 0.20
SEP   2024 – 9                              DEC 151.20 – 0.25
NOV 2035 – 9                               MAR 154.40 – 0.30
JAN   2046 – 9                              MAY 156.40 – 0.30
MAR 2051 – 9                              JUL 158.35 – 0.35